Best Buy Stock Declines as Apple Warns of Lower iPhone Sales

Consumer electronics retailer Best Buy’s stock (BBY) fell 4.1% as of 9:40 AM ET today after Apple’s (AAPL) CEO, Tim Cook, updated investors about a lower-than-expected top line for the first quarter of fiscal 2019[1. Fiscal Q1 2019 for Apple ended on December 29, 2018]. Best Buy stock recovered to some extent and was down 0.7% as of 11:28 AM.

Apple expects its first-quarter revenue to be hurt by lower iPhone sales, mainly due to a slowdown in China. Best Buy stock is adversely affected by the news as mobile phones are one of the key product categories for the retailer. Following the update, UBS cut its price target for Best Buy stock to $57 from $70.

Best Buy stock declined 22.7% in 2018, compared to the S&P 500’s 6.2% fall. The company’s third quarter of the fiscal year[1. For Best Buy, Q3 of fiscal 2019 ended on November 3], revenue and earnings exceeded analysts’ expectations. But weak margins and guidance for the fourth quarter made some analysts cut their price targets for Best Buy.

Best Buy stock fell 5.7% on December 17 as Bank of America Merrill Lynch downgraded its recommendation from “neutral” to “underperform” and lowered its price target from $70 to $50. The rating downgrade was backed by several factors, including a slowdown in sales of certain consumer electronics categories, like TVs, iPhones, and gaming products.

Currently, analysts expect Best Buy’s revenue to decline 4.4% to $14.7 billion in the fourth quarter. Aside from an expected slowdown in certain categories, the forecast decline in the holiday quarter revenue also reflects a comparison with a very strong fiscal 2018 fourth quarter. Best Buy is trying to boost its top line by focusing on growth categories like smart homes and its services business.

As of January 2, the average 12-month price target for Best Buy stock was $72.05, which reflected an upside of about 34%.